When it comes to improving your credit score, misinformation is everywhere. Unfortunately, many people fall victim to common credit repair myths, which can lead them down the wrong path and further damage their financial health. Believing in quick fixes or outdated advice can cause you to waste time, money, and effort while your credit score remains stagnant.
To help you separate fact from fiction, we’ve debunked five common credit repair myths that could be holding you back. It’s time to stop believing these misconceptions and start making real progress toward a healthier credit score!
- Myth #1: You Can Pay Someone to Quickly Fix Your Credit
One of the biggest myths in the world of credit repair is that you can hire someone to instantly fix your credit score for a fee. Many credit repair companies or so-called “experts” promise to wipe away negative information or magically boost your score overnight. In reality, this is not only misleading but could also be a scam.
The truth:
- No one can remove accurate negative information from your credit report. If you have legitimate late payments, bankruptcies, or collections on your report, they’ll remain there for a set period (usually 7 years for most derogatory marks).
- Credit repair takes time and involves addressing legitimate debts, improving your payment habits, and reducing credit utilization.
What you should do instead:
- You can dispute inaccurate information on your credit report for free by contacting the credit bureaus directly.
- Focus on improving your score by making on-time payments, paying down balances, and practicing good financial habits over time. There are no quick fixes for building a solid credit history.
- Myth #2: Closing Credit Card Accounts Will Boost Your Score
Many people believe that closing credit card accounts—especially those they’re no longer using—will improve their credit score. While this might seem like a good idea at first glance, it can actually hurt your credit score in more ways than one.
The truth:
- Closing credit card accounts reduces your total available credit, which can increase your credit utilization ratio (the amount of credit you’re using compared to your available credit). A higher utilization ratio can negatively impact your score.
- Closing older accounts can also shorten the length of your credit history, another key factor in determining your credit score. Keeping long-standing accounts open helps build a more favorable credit profile.
What you should do instead:
- Keep old credit cards open, even if you’re not using them regularly. This keeps your credit utilization low and maintains a longer credit history.
- If you’re worried about overspending, you can tuck the card away, but don’t close the account unless there are hefty annual fees you can’t justify.
- Myth #3: Checking Your Own Credit Will Hurt Your Score
A common misconception is that checking your credit score will lower it. People often avoid monitoring their credit because they fear that looking at their own score will cause damage. This myth can keep you from staying informed about your credit health and taking proactive steps to improve it.
The truth:
- Checking your own credit is considered a soft inquiry, which has no impact on your credit score. You can pull your credit report as many times as you want, and it won’t hurt your score.
- Hard inquiries (such as applying for a loan or new credit card) are what can temporarily lower your score, but these typically only result in a minor, short-term impact.
What you should do instead:
- Regularly check your credit report to monitor your progress and catch any errors or suspicious activity. You can access free credit reports from each of the three major credit bureaus at AnnualCreditReport.com once a year.
- Stay informed about your credit standing and review your report for accuracy.
- Myth #4: Paying Off Old Debts or Collections Immediately Improves Your Score
Many people assume that paying off old debts or collections will instantly boost their credit score. While paying off debts is essential for improving your financial situation, it doesn’t always translate into an immediate credit score jump—especially when it comes to older accounts or collections.
The truth:
- Paying off old debts or collections may not remove them from your credit report. The negative marks (late payments, charge-offs, collections) will remain on your report for up to 7 years, even if the account is paid in full.
- However, paying off a collection can prevent further damage to your score, and some lenders may view it more favorably when evaluating your creditworthiness.
What you should do instead:
- Focus on settling outstanding debts to stop accruing interest or additional late fees and to improve your chances of qualifying for new credit. Some lenders may also consider your willingness to pay off past debts when reviewing your applications.
- Over time, as the negative items age, their impact will lessen, and your score will gradually improve. But don’t expect an immediate boost.
- Myth #5: You Only Need to Worry About Credit If You’re Applying for a Loan
Many people think their credit score only matters when they’re applying for a loan, mortgage, or credit card. As a result, they may ignore their credit health until they’re ready to make a major purchase. This myth can lead to serious problems, as your credit score affects far more than just loans.
The truth:
- Your credit score plays a role in many aspects of your financial life. Landlords, insurance companies, utility providers, and even employers may review your credit when making decisions. A low score could result in higher insurance premiums, trouble securing housing, or even missing out on job opportunities.
- Maintaining a good credit score is essential to financial freedom, whether or not you’re planning to borrow money in the near future.
What you should do instead:
- Pay attention to your credit score year-round, not just when applying for loans. Use it as a gauge of your overall financial health and make sure it’s moving in the right direction.
- Establish good financial habits, like paying bills on time, managing debt, and using credit responsibly, to keep your score strong.
- Final Thoughts: Don’t Fall for Credit Repair Myths
Improving your credit score takes time, discipline, and smart financial habits. Don’t let these credit repair myths lead you astray or prevent you from making real progress. By understanding the truth behind these misconceptions, you can take control of your credit and work toward a brighter financial future. Remember, there are no shortcuts when it comes to repairing your credit, but with consistent effort, the results are worth it.